Welcome to MedServe Healthcare Solutions

  Contact : +971 (5) 5487 8887

UAE’s health care a magnet for mega deals

Dubai: The UAE’s health care sector is now seeing as much activity in its corporate boardrooms as there are people queuing up at hospitals and clinics across the country. Deals are being cut, substantial funds are getting pumped into new health care facilities and the big names are stitching together ambitious takeover strategies.
The week gone by has seen Al Noor Hospitals Group being bought by South Africa’s major health care operator MediClinic International, in a deal valued at $2.12 billion (Dh7.8 billion). The combined entity has a turnover of £4 billion plus and a network of 73 hospitals and 35 clinics.
Another UAE based operator, NMC, had also made an offer for Al Noor, which was rejected. In a relatively strongly worded rejoinder — a rare instance in the UAE and Gulf’s corporate pantheon — NMC said: “This confirms our belief in the competitiveness of our initial possible offer and that the combination of NMC and Al Noor has the strongest strategic and financial rationale for all stakeholders.”
The final word may yet to have been said in this particular deal.
But will the onrush of offers and counter proposals spell good for the country’s residents seeking top-notch — and affordable — health care? Are the vast amounts of private equity finding its way into health care pushing up costs for patients?
“I don’t think it’s private equity itself that is raising costs — the most significant expenses have been increases in building costs (for hospitals), need for even more expensive equipment and for manpower,” said Dr Azad Moopen, Chairman and Managing Director of Aster DM Healthcare. (The group is reputedly the first of the regional health care operators to pull in private equity, in 2008-09.)
“In each of the last five years, the cost of recruiting (and retaining) highly qualified doctors has gone up by 5-10 per cent annually. Even then there are issues of availability with skilled manpower, raising expenses for the operator.”
Population density
And it all keeps adding up. In the last three years, there has been a complete reconstruction of health care provisioning in the UAE. Smaller neighbourhood clinics were bought over by generic chains. Multi-speciality hospitals opened at just about any available high population density locations, and more are on the way. Compulsory health care insurance in Abu Dhabi and Dubai has been the other propellant for growth.
“There is a race among health care providers and private equity to build up their networks well before a saturation level is reached on sector’s growth prospects,” said Dr Moopen. “Right now, the growth is touching high double-digits, but there is a need to prepare for a time when they slip into low single digits.
“The reason why there is so much interest in buying an existing operator is to help save time. A greenfield health care project could take anywhere up to three to four years from drawing board to the actual opening. Buying an existing asset saves time.”
The health care investment arm of Al Masah Capital has just gone through a rebranding — it is now known as “Avivo Group” and quite distinct from its earlier avatar, “Healthcare Mena Ltd”.
According to Shailesh Dash, Founder and CEO of Al Masah Capital, the consolidation wave in local health care will translate into greater benefits for patients by bringing in a “consistent service’ to what they offer.
“Regulatory changes on quality and insurance requires bigger investments — which makes it difficult for smaller operators,” said Dash. “As a result, we expect to see more consolidation in the industry.
“Larger operators also offer to the patient the convenience of accessing a wider range of services, quality improvement and specialities under the same roof and saves him time.”
Fund inflow
The Avivo Group currently lists 32 facilities in its network, which will be raised to 50 by end-2016 through an infusion of Dh1.1 billion from Al Masah Capital. The intention is to service 2 million patients a year from the current 1.3 million.
“Health care asset values have indeed increased due to the significant funds that have flowed into the sector,” said Dash. “But [it is] also due to a better sector outlook driven by a more advantageous legal framework and increasing demand for accessible high-quality health care services.
“But they are at the same time trading at multiples lower than the Asian and Western markets. Therefore, we believe there is further room for growth in the pricing for these assets.”
Health care deal-making in the UAE sports a rosy hue
The pipeline of deals has been robust, with MediClinic’s acquisition of Noor Hospitals just the latest. Noor Hospitals itself bought the rehabilitation services provider Rochester Wellness. Two years ago, Al Noor had bought over Abu Dhabi based Gulf International Cancer Centre.
In June, NMC Healthcare confirmed the $160.6 million purchase of ProVita International Medical Centre, using funds sourced from raising a $475 million loan.
In April, NMC bought 90 per cent in Americare for $33 million. The latter offers home-based services.
Also in April, NMC announced a deal for Dr Sunny Healthcare Group, which had its strengths in serving a predominantly Sharjah based populace.

Leave a Reply

Your email address will not be published. Required fields are marked *